Bradford & Bingley increases cash call

Bradford & Bingley (BB-) has expanded its rights issue to £400 million after the American investor it had lined up to take a stake in the business got cold feet.

Back in June, the buy-to-let lender announced plans

to raise additional capital of £400 million - £258 million through a rights issue and £179 million from Texas Pacific Group (TPG), a US private equity investment firm.

However, TPG has now walked out on its deals to take a 23% stake in the bank, forcing Bradford & Bingley to change its plans.

It will now raise £400 million through its shareholders, with the deal backed up by a group of UK investors. A number of its largest shareholders, including Legal & General, Standard Life, M&G and Insight Investment, have supported the deal to sell new shares at 55p per share.

Citi and UBS will continue to underwrite the enlarged rights issue. Further details will be announced in due course.

Executive chairman Rod Kent said: "While we are disappointed that TPG intends to terminate its subscription agreement, I am pleased that Citi and UBS and our major shareholders continue to support our proposed capital issuance.

'Bradford & Bingley continues to be well-funded and the capital raising will reinforce our position as one of the better capitalised banks and one of the leading mortgage and savings banks in the UK."

The bank's share price has fallen in light of the announcement by around 10%, leaving it hovering around the 55p mark.